Sunday, 20 May, 2018

Ford Phasing out Sedans in North America

Ford seeks to accelerate profit margins, drop less popular models Ford says it's dropping unpopular sedans to boost margin, beats in Q1
Lindsey Cook | 26 April, 2018, 12:44

As part of its first-quarter earnings report posted today (April 25) Ford announced that in the near future, it will be condensing its line of USA auto models to just the Mustang and the forthcoming Focus Active, a small crossover vehicle.

Ford "will not invest in next generations of traditional Ford sedans for North America", including the midsize Fusion and full-size Taurus, the company said.

Ford's shares traded up about 2.2% in after-hours trading Wednesday at $11.35 after closing at $11.11, in a 52-week range of $10.14 to $13.48. Sedan sales across the industry have been falling off the proverbial cliff in the last two years as consumers flock to utility vehicles.

"Where we can raise the returns of underperforming parts of our business by making them more fit, we will", Hackett said.

Ford CFO Bob Shanks announced the improved guidance as the company reported a nine per cent increase in first-quarter net income.

The bulk of Ford's quarterly profit was driven by high-margin pickup trucks and SUVs in North America.

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Ford is pretty serious about trimming its USA lineup in the coming years, and that's bad news for anything that isn't a truck or SUV. We will have to make choices around how we disposition those businesses going forward.

Shanks wouldn't say whether Ford would need to eliminate jobs to achieve the additional $11.5 billion in cost cuts. Europe was the only other region to turn a profit for Ford.

He also said the company was reducing its planned capital spending from 2019 through 2022 by $5 billion to $29 billion through such actions as using common "modules" to account for 70 percent of the value of each vehicle and reusing tools and equipment.

But the market in the United States has shifted to larger vehicles that consumers perceive as safer; Ford's decision to pare down their model offering to trucks and sports cars appears to be servicing the demand it sees directly ahead of it.

Automotive segment revenues totaled $39 billion for the quarter, up by $2.5 billion year over year but automotive pre-tax margin slipped by 1.1 percentage points to 7.8%.

"Everything will be on the table" to fix Ford, Shanks told reporters in Dearborn, Michigan, where the company is headquartered. The company previously predicted $14 billion in cuts by 2022. Its Asia Pacific business swung to a $119 million loss, from a $148 million profit a year ago.

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